How Anwar Sadat’s Open Door policy integrated Egypt with developed market economies

Anwar Sadat decisively broke with predecessor Nasser’s Soviet-influenced statist model by introducing the Open Door policy. (Supplied)
Anwar Sadat decisively broke with predecessor Nasser’s Soviet-influenced statist model by introducing the Open Door policy. (Supplied)
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Updated 07 October 2021

How Anwar Sadat’s Open Door policy integrated Egypt with developed market economies

Anwar Sadat decisively broke with predecessor Nasser’s Soviet-influenced statist model by introducing the Open Door policy. (Supplied)
  • Intifah broke with predecessor Gamal Abdel Nasser’s Soviet-influenced centrally planned model
  • Economy was supported by increased US aid money, Suez Canal revenues and a nascent tourism industry

LONDON: In the winter of 1973, Anwar Sadat was enjoying his time in the sun. He was “batal al-ubur” – the “Hero of the Crossing.” The 1973 war against Israel was a huge propaganda success, never mind that the reality was very different from how the Egyptian media portrayed it. 

After years of planning, the Egyptian army had successfully crossed the Suez Canal, catching the Israeli army unawares. National pride had been restored and the Egyptian public had bestowed a new title on Sadat. 

But at home, Sadat’s problem was the state of the economy. The expectations of the Egyptian public were high following the military victory; confrontation with Israel could no longer be used as an excuse for every privation they suffered. 

Defeat in the 1967 war six years previously had near-bankrupted Egypt and seriously harmed industry. Both inflation and foreign debt were high. 

Over the course of his 14 years in power, Sadat’s predecessor Gamal Abdel Nasser had courted and won the support of the Soviet Union. 

Together, Nasser and the Russians had built the second Aswan dam, a project designed to launch Egypt on the twin tracks of industrial and agricultural development. 

The ambitions had not been fully realized. The early years of the dam project were hit with teething problems. Land downstream from the dam was affected by increased salinity and waterlogging. 




Defeat in the 1967 war six years previously had near-bankrupted Egypt and seriously harmed industry. Both inflation and foreign debt were high. (AFP/File Photo)

As Sadat took power following Nasser’s death in 1970, the economy was still run according to the dictates of central planners. 

Prices for essential commodities were controlled and investment in projects was centrally dictated, leading to widespread shortages and wastage. 

Egypt’s youthful population stood at 34.5 million, with rates of growth in the order of 2.5 percent. 

The economy was hampered by low levels of productivity, an absence of relevant education and a consequent lack of skilled workers. Farmers were told what to plant. In today’s terminology, price indicators were not effective. 

Other problems persisted. One of Nasser’s legacies was the creation of a huge public sector and an overregulated state economy, emulating the Soviet Union.

He had opened up higher education to all and guaranteed a job to every graduate with little heed paid to quality or relevance of training. 

College graduates flocked into ministries, municipalities and into state-controlled companies where security of tenure was guaranteed. The result was low levels of productivity coupled with a tendency to obstruct innovation and entrepreneurship. 

Nasser had also orchestrated the emigration of large communities of Italian and Greek craftsmen, artisans and small-scale businessmen, the so-called mutamasriyun. 

While reforms in the 1950s had broken the power of the big landlords, these more minor actors had been alienated by the state seizing their property. 

Between 1962 and 1964, for example, all foreign-owned land had been expropriated. The Jewish community had also all but fled the country in the 1950s. 

INNUMBERS

* $3bn - Excess of Egyptian food imports over exports in 1981. 

* 90% - Foreign capital’s share of financing of public projects.

The result of the exodus was a collapse in municipal and other services and an absence of skilled workers in the public sector and in utilities like electricity supply. 

Sadat had never been afraid of a challenge and was fond of the dramatic gesture. He had worked as a spy for the Germans in the Second World War against the British and then served as Nasser’s deputy. He moved decisively to break with his predecessor by reopening Egypt up to foreign investment. 

This was the infitah — or opening — also known as the Open Door Economic Policy. It was a collection of liberalization measures linked to a degree of political easing. 

The policy involved a rejection of the close ties with the Soviet Union, building closer relations with the US and Arab Gulf states, and the distancing of the military from the economy. 

Following Nasser’s death, Sadat had prefigured the reforms with a Plan for National Action in 1971 and, in 1972, had expelled thousands of Soviet military advisers. 

In 1974, he promulgated a new investment regulation titled Law 43. Tariffs were lowered and foreign banks were encouraged to return to the country. Sadat reversed some of the confiscations of private property. 

The new law’s main aim was to attract Arab and foreign investment capital. To that end, it created a new organization, the General Authority for Investment and Free Zones, under the auspices of the Ministry of Economy. 

According to “The Experience of Foreign Investment Under Infitah,” by Hadi Salehi Esfahani, the law provided incentives and included a promise to refrain from nationalization and the confiscation of invested capital except by judicial procedures. It exempted investors from a number of labor regulations; it gave a five- to eight-year exemption from taxes on profits; allowed for a deferment on the payments of customs duties, and gave permission to import without a license. 




In the winter of 1973, Anwar Sadat was enjoying his time in the sun. He was “batal al-ubur” – the “Hero of the Crossing.” (Supplied)

The results were patchy but the trajectory for the Egyptian economy was upward. According to “Egypt’s Development In the 1970s,” by Henry Bruton, private investment under Law 43 was slow at the start, and did not reach 100 million Egyptian pounds ($6.6 million) until 1979. Investment was heavily concentrated in sectors such as banks, consulting offices, fast-food shops and construction. 

However, GDP growth rates rose to 8 to 10 percent per annum through the 1970s and the balance of payments moved favorably. Yields of cotton and rice increased significantly. 

Toward the end of the decade, Egypt was massively helped by a relatively sudden infusion of foreign exchange as large deposits of oil and gas came on stream and were monetized. 

The economy was also supported by increased aid money from the US, Suez Canal revenues and the beginning of Egypt’s tourism industry. The canal had been closed in 1967 but Sadat reopened it in 1975. Revenues from ships passing through the canal began to flow to the Egyptian state. 

The Gulf states also opened to Egyptian labor as their oil and gas reserves flowed. This proved to be something of a double-edged sword for Sadat. 

Many skilled and educated Egyptians chose to migrate, to take advantage of the higher wages on offer in the Gulf states and elsewhere. On the brighter side, the workers began to send back remittances — as they do to this day. 

Remittances grew from nothing in 1971 to over $2.2 billion in 1979, according to official numbers, but were probably higher if informal transfers are included. 




When Sadat took power following Nasser's death, the economy was still run according to the dictates of central planners - prices and investments were strictly controlled. (Supplied)

The combination of workers’ remittances, oil and gas revenues, earnings from the Suez Canal, and tourism receipts propelled foreign exchange reserves to $2.5 billion in 1980 from less than $0.5 billion in 1972. 

But the budget deficit swelled, inflation spiked, imports rose dramatically and income disparities grew. Defense spending remained a heavy burden. 

In 1977, the Central Bank started printing 20-pound notes. In 1979, the pound was devalued and subsequently lost almost half its value, for the first time falling below parity with the pound sterling. 

Moreover, the World Bank and International Monetary Fund were prescribing an end to subsidies on basic foodstuffs which was a major cause of the persistent budget deficits. 

In 1977, Sadat announced price hikes for flour, rice and cooking oil at the behest of the World Bank. This provoked massive riots by poor Egyptians. 

Most major Egyptian towns and cities were hit by violence. More than 70 people died. The fear of provoking similar levels of rioting has gripped the Egyptian ruling classes ever since.


Iran shows off underground drone base, but not its location – state media

Iran shows off underground drone base, but not its location – state media
Updated 28 May 2022

Iran shows off underground drone base, but not its location – state media

Iran shows off underground drone base, but not its location – state media
  • State TV said 100 drones were being kept in the heart of the Zagros mountains, including Ababil-5

The Iranian army has given some details — but not the exact location — of an underground base for its military drones, state media reported on Saturday, amid simmering tensions in the Gulf.
State TV said 100 drones were being kept in the heart of the Zagros mountains, including Ababil-5, which it said were fitted with Qaem-9 missiles, an Iranian-made version of air-to-surface US Hellfire.
“No doubt the drones of Islamic Republic of Iran’s armed forces are the region’s most powerful,” army commander Major General Abdolrahim Mousavi said. “Our capability to upgrade drones is unstoppable,” he added.
The Iranian state TV correspondent said he had made the 45-minute helicopter flight on Thursday from Kermanshah in western Iran to a secret underground drone site. He was allowed to take blindfolds off only upon arrival at the base, he said.
TV footage showed rows of drones fitted with missiles in a tunnel, which it said was several hundred meters underground.
The TV report came a day after Iranian Revolutionary Guards seized two Greek tankers in the Gulf, in an apparent retaliation for the confiscation of Iranian oil by the United States from a tanker held off the Greek coast.
Greek authorities last month impounded the Iranian-flagged Pegas, with 19 Russian crew members on board, due to European Union sanctions. The United States later confiscated the Iranian oil cargo held onboard and plans to send it to the United States on another vessel.
The Pegas was later released, but the seizure inflamed tensions at a delicate time, with Iran and world powers seeking to revive a nuclear deal that former US President Donald Trump abandoned, reimposing sanctions on Tehran.


Iran police tear-gas protesters after building collapse – media

Iran police tear-gas protesters after building collapse – media
Updated 28 May 2022

Iran police tear-gas protesters after building collapse – media

Iran police tear-gas protesters after building collapse – media
  • A large section of the 10-story Metropol building that was under construction in Abadan, Khuzestan province crumbled on Monday

TEHRAN: Iranian police fired tear gas and warning shots to disperse protesters in the southwestern city of Abadan where a tower block collapse killed 28 people, local media reported on Saturday.
A large section of the 10-story Metropol building that was under construction in Abadan, Khuzestan province, crumbled on Monday in one of Iran’s deadliest such disasters in years.
It was the third night of protests in Abadan and other cities of the province which borders Iraq, local media reported.
Security forces in Abadan “used tear gas and shot in the air near the collapse site” on Friday night to disperse hundreds of protesters, who were mourning the lives lost and demanding justice for the perpetrators of the incident, Fars news agency said.
A number of people shouted “death to incompetent officials” and “incompetent officials must be executed,” similar to calls in protests on Wednesday and Thursday nights, it added.
Elsewhere in Khuzestan another protest, in the city of Bandar-e Mahshahr, saw people chanting while banging on traditional drums and hitting cymbals, images published by Fars showed.
People also took to the streets further afield including in the central Iranian cities of Isfahan, Yazd and Shahin Shahr on Friday to express sympathy with the victims of the tragedy, Fars news agency said.
On Thursday night, a shop in Abadan belonging to the family of the building’s owner “was set on fire and destroyed by unknown individuals,” Tasnim news agency reported earlier.
Interior Minister Ahmad Vahidi, who is in Abadan, said on Saturday that “two more bodies were recovered” and sent for identification, raising the death toll to 28, according to state news agency IRNA.
Officials, however, have not announced how many are people still trapped under the rubble.
The number of suspects has also risen.
Khuzestan’s provincial judiciary said on Saturday that 13 people have now been arrested in relation with the incident, including the mayor and two former mayors, IRNA said.
In a statement posted on his official website on Thursday, Iran’s supreme leader Ayatollah Ali Khamenei called for those responsible to be prosecuted and punished.
First Vice President Mohammad Mokhber told state television that “widespread corruption existed between the contractor, the builder, the supervisor and the licensing system.”
In January 2017, 22 people, including 16 firefighters, died in a blaze that engulfed the 15-story Plasco shopping center in Tehran.


Tunisia party leader banned from travel: court

Tunisia party leader banned from travel: court
Updated 28 May 2022

Tunisia party leader banned from travel: court

Tunisia party leader banned from travel: court
  • Rached Ghannouchi heads the Islamist-inspired Ennahdha party that has dominated Tunisia’s post-revolution politics

TUNIS: A Tunisian court has imposed a travel ban on the speaker of the country’s now-dissolved parliament, a court spokeswoman said.
The interdiction against Rached Ghannouchi is part of an inquiry into alleged obstruction of justice in connection with the assassination in 2013 of two left-wing figures, the court spokesman said on Friday.
The travel ban was imposed on “34 suspects in this case, including Rached Ghannouchi,” Fatima Bouqtaya, spokeswoman for the court in the Tunis suburb of Ariana, told AFP.
Ghannouchi heads the Islamist-inspired Ennahdha party that has dominated Tunisia’s post-revolution politics.
Ghannouchi, 81, is a fierce critic of President Kais Saied who in July 2021 suspended the Ennahdha-dominated parliament, sacked the prime minister and assumed executive powers.
Saied then dissolved parliament in March this year. His moves have stoked fears of a return to autocracy in a country where a revolution in 2011 triggered the pro-democracy Arab Spring movement in the wider region.
Tunisia’s judiciary in January opened an investigation against the suspects for allegedly “concealing information” linked to the killing nine years ago of Chokri Belaid and Mohamed Brahmi.
The Daesh group claimed both killings but Ennahdha critics including a brother of one of the victims accused the party of having “manipulated and slowed down” the case.


US, Netherlands back UN aim to raise $144 million for Yemen’s Safer tanker emergency operation

US, Netherlands back UN aim to raise $144 million for Yemen’s Safer tanker emergency operation
Updated 28 May 2022

US, Netherlands back UN aim to raise $144 million for Yemen’s Safer tanker emergency operation

US, Netherlands back UN aim to raise $144 million for Yemen’s Safer tanker emergency operation
  • In the event of an oil spill, the cleanup alone is expected to cost $20 billion

The US and the Netherlands support UN efforts to address and avert the economic, environmental, and humanitarian threats posed by Yemen’s Safer oil tanker in the Red Sea region.

Dutch Ambassador to the US André Haspels hosted a meeting joined by US Special Envoy Lenderking, Yemeni Ambassador to the US Mohammed Al-Hadrami and representatives from the diplomatic community in Washington, on Friday.

They stressed the importance of raising $144 million to fund the UN’s operational plan, which includes $80 million for an emergency operation to offload the oil from the decaying tanker to a temporary vessel, an official joint statement said.

At a pledging event co-hosted by the UN and the Netherlands earlier this month, nearly half the funds required for the emergency operation were raised, but more was urgently needed to move forward.

Safer is a rapidly decaying and the unstable oil tanker that could leak, spill or explode at any time and could severely disrupt shipping routes in the Gulf region and other industries across the Red Sea, unleash an environmental disaster and worsen the humanitarian crisis in Yemen.

By October, high winds and volatile currents will make the UN operation more dangerous and increase the risk of the ship breaking apart. In the event of a spill, the cleanup alone is expected to cost $20 billion.

“We urge public and private donors to consider generous contributions to help prevent a leak, spill, or explosion, whose effects would destroy livelihoods, tourism, and commerce in one of the world’s vital shipping lanes,” the statement read.

Last month, Lenderking and Dutch Ambassador to Yemen Peter Derrek Hof joined UN Resident and Humanitarian Coordinator for Yemen David Gressly on a trip in the Gulf to increase awareness of the imminent risks the Safer poses to the entire region.

“The international community, private sector included, must take action now to address the imminent threats posed by the Safer,” the statement said.


Turkey captures the new leader of Daesh in Istanbul raid

Turkey is keen to up the ante against its NATO allies in order to show its commitment to counterterrorism efforts. (AFP)
Turkey is keen to up the ante against its NATO allies in order to show its commitment to counterterrorism efforts. (AFP)
Updated 28 May 2022

Turkey captures the new leader of Daesh in Istanbul raid

Turkey is keen to up the ante against its NATO allies in order to show its commitment to counterterrorism efforts. (AFP)
  • Ankara aligning with Western security priorities to remind NATO allies of common terror threats, analyst tells Arab News

ANKARA: Turkey captured the new leader of the militant group Daesh in a raid in Istanbul, local media claimed on Thursday.

Turkish dissident news website Oda TV claimed Abu Al-Hasan Al-Hashimi Al-Qurayshi was caught in an operation directed by Istanbul’s police chief, Zafer Aktas, after days of surveillance and preparation, though no official statement has yet been made.
According to Turkish press reports, President Recep Tayyip Erdogan is expected to unveil details of the operation in the coming days.
The previous leader of Daesh, Abu Ibrahim Al-Hashimi Al-Qurayshi, was killed in northwestern Syria on Feb. 3 by US forces.
In recent months, Turkish police have systematically carried out raids against Daesh cells across the country. Earlier in May, a prospective suicide bomber allegedly linked to the group was arrested in Urfa on the Syrian border, while three more people were detained the same week in Bursa.
On Thursday, another Daesh member was shot dead by police while allegedly trying to blow himself up in front of the police department in the southeastern province of Gaziantep.
Experts note that this most recent operation could be used as leverage by Ankara to up the ante against its NATO allies in order to show its commitment to counterterrorism efforts.

It is not a coincidence that Ankara allegedly captured the top figure of Daesh amid ongoing debates about NATO enlargement and Turkey’s accusations against some Nordic countries about their alleged support of terror groups.

Soner Cagaptay, Analyst

Soner Cagaptay, director of the Turkish Research Program at the Washington Institute, thinks that the timing of the operation in Istanbul is telling.
“It is not a coincidence that Ankara allegedly captured the top figure of Daesh amid ongoing debates about NATO enlargement and Turkey’s accusations against some Nordic countries about their alleged support of terror groups,” he told Arab News.
According to Cagaptay, Turkey is aligning with Western security priorities and trying to remind its NATO allies that it helps them against common terror threats.
Turkey is also part of the large international coalition of nations that has spent years fighting Daesh.
During the latest ministerial meeting of the coalition in the Moroccan city of Marrakesh, Turkey’s Foreign Minister Mevlut Cavusoglu also brought up Turkey’s own concerns, saying the fight against Daesh cannot be won with the help of other terror groups.
This was widely interpreted as a reference to Kurdish groups such as the People’s Protection Forces, or YPG, which has received some support from Sweden, which is applying to join NATO — a move Turkey is, as a result, opposing.
“This latest operation in Istanbul is instrumental for Ankara to urge the Western alliance that it is now their turn to understand Turkey’s domestic terrorism concerns that cover not only Daesh but also other terror groups including the Kurdistan Workers’ Party — PKK — and its Syrian offshoot YPG,” Cagaptay said.
The reported capture of Al-Qurayshi also coincided with the gathering of the National Security Council, chaired by Erdogan, on Thursday, where details of Turkey’s impending operation against YPG militants in northern Syria was discussed.   
“The operations currently carried out, or to be carried out, in order to clear our southern borders from the threat of terrorism, do not in any way target the territorial integrity and sovereignty of our neighbors and they pose a necessity for our national security needs,” the meeting’s final communique said.
Ankara believes it faces security threats from Manbij, Ain Al-Arab and the Tal Rifat district of Aleppo, which it considers bases for hostile groups.
Erdogan announced on Monday that he would launch the offensive into northern Syria to push back the YPG, and secure a 30 kilometer safe zone to settle Syrian refugees currently living in Turkey.
However, a potential military operation — after three previous offensives — does not seem to have received approval from the US for the time being.
“We recognize Turkey’s legitimate security concerns on Turkey’s southern border, but any new offensive would further undermine regional stability and put at risk US forces and the coalition’s campaign against ISIS (Daesh),” US State Department spokesperson Ned Price said on May 24 in a press briefing.
Colin P. Clarke, director of research at The Soufan Group, thinks that anti-Daesh operations in Turkey can have a significant impact on the group’s presence in the region.
“Even when Daesh still held its territorial ‘caliphate,’ it was dispatching operatives to Turkey to lay the groundwork for financial and logistical support networks. Those networks have paid off for Daesh, as it’s allowed the leadership consistent access to money,” he told Arab News.
According to Clarke, the Turkish government should be incentivized to crack down even harder on Daesh, but there is some concern about a backlash, including terror attacks inside Turkey.
Daesh members have carried out a number of attacks across the country, including at least 10 suicide bombings, seven bombings, and four armed attacks, which have killed 315 people and injured hundreds of others to date.